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September 22, 2009

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RBS may tap shareholders for extra cash

SHARES in Royal Bank of Scotland PLC dropped 5.3 percent yesterday after media reports said the bailed-out lender is considering tapping shareholders for cash to reduce the government's involvement in its finances.

RBS hopes to keep the government from increasing its stake in the bank to as much as 84.5 percent from 70 percent by limiting its participation in the Government Asset Protection Scheme - an insurance plan for the hard-to-sell securities that are burdening bank finances - The Times of London reported, citing unidentified sources.

A spokesman for the bank declined to comment.

RBS posted the largest annual loss in British corporate history last year - a 24.1 billion pound (US$34.4 billion) black hole fed by the bank's aggressive acquisition spree of recent years, including the takeover of ABN Amro.

After the group was bailed out, its management announced it would place hundreds of billions of pounds of shaky securities dubbed toxic assets into the government protection program.

The scheme is costly, however, and, with financial markets stabilizing and economic indicators pointing to recovery, bailed-out banks have been looking for alternatives to the plan.

Yesterday's reports come a week after Lloyds Banking Group said it is negotiating with regulators about reducing the amount of toxic assets to be covered by the GAPS.

RBS shares fell 5.3 percent to 53.30 pence while Lloyds was down 2.4 percent at 108.05 pence.


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